The well-known market analyst, Ming-Chi Kuo of the KGI securities, has issued a new note to investors with his latest forecast on iPhone sales during 2017. Kuo predicts around 40-5- million iPhone unit shipments in the first quarter of 2017 i.e. the last quarter of 2016.

The reason behind his conservative estimate is the weakening demand for company’s 4.7-inch iPhone variant and the fruit company losing its Chinese market share to the local OEMs. The analyst also believes that Apple won’t be launching a revision of its 4.0-inch iPhone SE in 2017 in an effort to avoid cannibalization of the larger iPhone devices.

Due to the lack of a new iPhone SE revision in 2017, Kuo forecasts a further decline in iPhone sales during the second quarter of 2017. He estimates the sales to be around 35-40 million units – a decline from 40.2 million units during the same timeframe in 2016.This decline in iPhone sales will further push the company to force its component suppliers to decrease the cost of production so that company may maintain its healthy profit margins.

Some component suppliers like display panels and PCB manufacturer will have to agree to Apple’s demand. However, some major suppliers like Samsung that is responsible for supplying 3D NAND flash and 3GB DRAM can actually raise the prices of these components due to the shortage of DRAM in the market. Since TSMC’s foundries are usually pre-booked by the companies in advance, it will also likely remain unaffected from these price cuts.